JPMorgan cuts Smartsheet target to $56.50 on acquisition news By Investing.com

On Tuesday, JPMorgan downgraded Smartsheet Inc . (NYSE:) to Neutral from Overweight and adjusted its price target to $56.50 from $60.00. This move followed the announcement that Smartsheet has agreed to be acquired by private equity firms Blackstone (NYSE:) and Vista Equity Partners. The all-cash transaction values the company at approximately $8.4 billion, or $56.50 per share.

The acquisition is slated for completion in Smartsheet’s fiscal fourth quarter, which ends in January 2025. It includes a 45-day period in which Smartsheet can solicit alternative proposals, ending on November 8, 2024. The deal is significant for Smartsheet, a company currently operating without debt and holding around $707 million in cash reserves.

The valuation multiples cited by JPMorgan point to an enterprise value (EV) to forward twelve months (FTM) revenue multiple of 6.4 times, approximately 6 times the calendar year 2025 (CY25) revenue. The EV to FTM unlevered free cash flow (uFCF) multiple stands at around 28 times, or 25 times the CY25 uFCF. These multiples are derived from the company’s current financial position and the terms of the acquisition.

The new price target of $56.50 set by JPMorgan aligns with the per-share price offered by Blackstone and Vista Equity Partners. This price reflects the agreed-upon terms of the acquisition and the expected financial trajectory of Smartsheet leading up to the deal’s anticipated closure.

In other recent news, Smartsheet, a collaboration software company, has been acquired by private equity firms Vista Equity Partners and Blackstone for a total of $8.4 billion. This major development in the software industry values Smartsheet shares at $56.50 each. The agreement is set to bolster Smartsheet’s position in the market, with Vista and Blackstone providing considerable resources and tech industry expertise.

Simultaneously, Smartsheet has reported a 17% increase in revenue for the second quarter of fiscal year 2025, amounting to $276.4 million. The company’s annualized recurring revenue also saw a 17% rise, reaching $1.093 billion. KeyBanc Capital Markets maintains a Sector Weight rating on the company, noting that Smartsheet could command a higher value in a private equity transaction.

Furthermore, Smartsheet’s Chief Operating Officer, Stephen Branstetter, has resigned from his position, transitioning to an advisory role. This development is part of the company’s restructuring of its executive structure, introducing a dual President model and eliminating the COO position.

InvestingPro Insights

In light of the recent acquisition news for Smartsheet Inc., a glance at the latest metrics and analyst revisions from InvestingPro can provide a clearer picture of the company’s financial health and market position. Smartsheet’s market capitalization stands at around $7.7 billion, affirming the scale of the acquisition by Blackstone and Vista Equity Partners. Despite a negative P/E ratio, indicating that the company is not currently profitable, Smartsheet boasts a remarkable gross profit margin of 81.61% as of the last twelve months leading up to Q1 2023. This high margin underlines the company’s strong ability to control costs and maintain profitability at the gross level.

InvestingPro Tips suggest that Smartsheet holds more cash than debt, which is a positive sign of financial stability and may have been a contributing factor to the acquisition interest. Additionally, analysts predict that the company will become profitable this year, which could mean a brighter financial future for Smartsheet post-acquisition. For those interested in further insights, there are 10 additional InvestingPro Tips available, detailing aspects such as earnings revisions and stock volatility trends. These tips can be found at https://www.investing.com/pro/SMAR, providing deeper analysis for investors and stakeholders.

The company’s stock is trading near its 52-week high, with a price 99.78% of its peak, which demonstrates investor confidence leading up to the acquisition announcement. Furthermore, Smartsheet has experienced a strong return over the last three months, with a price total return of 25.49%, showcasing significant market momentum. These data points and insights from InvestingPro are essential for investors to consider as they assess the implications of the acquisition and the future prospects of Smartsheet Inc.

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